Daimler's Strategic Management and Market Analysis in China Case Study

This case study examines Daimler's strategic management within the context of the Chinese automotive market, focusing on the challenges and opportunities presented by evolving regulations and consumer preferences. It begins with an external and internal analysis utilizing frameworks such as PESTEL, SWOT, Porter's Five Forces, and value chain analysis to assess the competitive landscape and Daimler's position. The analysis highlights the impact of government policies, economic factors, social trends, and technological advancements. Furthermore, it explores Daimler's strategic responses, including its internationalization strategy, the establishment of a new R&D center, and the adoption of SMART goals. The study also incorporates cost-volume-profit (CVP) and VRIN analyses to evaluate the company's financial performance and competitive advantages. It concludes by assessing the challenges Daimler faces in the rapidly changing Chinese market, particularly in the context of electric vehicle (EV) development and the need to adapt to evolving consumer demands and technological advancements, and the need to comply with new market regulations.

Running Head: STRATEGIC MANAGEMENT
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Strategic Management
Student Details:

STRATEGIC MANAGEMENT 1
External and Internal analysis
PESTEL
Political: China implemented “Made in China 2025” strategy for clearing policies and targets
(Wildau, 2019). This national development policy helped Mercedes-Benz as the country
wanted to move towards the high-tech industries of manufacturing involving investments in
research and innovation, heavy government subsidies, and targets for local manufacturing.
Economic: Due to the risk of increasing air pollution, the country posed for economic
development and reduction in foreign oil dependency where Beijing made an investment for
EVs development and to build necessary supply chain. The China’s market was opened to
economic reform and invited foreign entrants previously while forming joint ventures of local
partners. The passenger-car manufacturing industry exploded its car sales in China showed
first slip in combustion engine sales dropped by 2.8 per cent (Kamchev, 2019).
Social: In China, Daimler need to responsive towards local consumers having specific
preferences where they require cars demonstrate online functionality increasing based on
WeChat app of Tencent facilitating communications (Lee, 2019).
Technology: China was required to leverage huge transformation of domestic market from
being a technology follower to technology leaders. In terms of moving towards an EV future
in China, there is severe issue of urban pollution in emerging markets where the local senior
management of Daimler faced conflicting pressures. This required technology sector to move
faster where Chinese government mandated technology advancements in vehicle
electrification for global leadership development in automobile industry (Masiero, et al.,
2016).
Environmental: The approach used by China was proven successful of using sustainable
energy which resulted from start subsidies to encouraging the company and reducing overall
costs. Legal: In China, the president Xi Jingping was a powerful leader who developed strong
guidelines for vehicle electrification with the approval of only new joint ventures where
Daimler announced a new US$740 million battery factory for EV (electric vehicles) of
Mercedes-Benz in China (Shepardson, 2018).

STRATEGIC MANAGEMENT 2
Legal: The government in China planned to spend $50 billion for strengthening its domestic
auto industry in line with the strategy of “Made in China 2025” (Helven, 2019).
SWOT
Strengths: Daimler is focused towards future, growth and internationalisation and has its
own five segments including Mercedes Benz. Daimler is one of the top luxury automobile
across the globe holding 15 per cent stake in different areas (Rauwald, 2019).
Weaknesses: Daimler’s weakness in terms of sales growth in its expensiveness after sales
maintenance and service. Moreover, there is low-key performance of its division of trucks
and buses.
Opportunities: Daimler has the opportunity of shaping diverse innovations where new
standards for pollutants emissions, fuel efficiency, and automotive safety were introduced by
the government making stricter regulations for new development emergence such as cars
electrification, ride sharing, autonomous vehicles and change in consumer preferences.
Threats: In automobile, China faced the problem of large-scale pollution due to driving
growth and population. Due to air pollution, China has decreased its lifespan from close to
three years and for other companies like Mercedes Benz market as well.
Porter’s five forces
Power of suppliers: There is a high power of suppliers in China where some countries
implemented incentives where authorities introduced policies for guaranteeing sales by
building supply for Chinese markers through procurement for public fleets. Moreover, Tesla
and BMW were making their own deals to lock down supply while Daimler partnered up
with auto supplier Bosch for intensifying fully automated cars development along with
driverless vehicles (Taylor, 2017).
Power of buyers: There is high power of buyers where they are provided with several
benefits for those buying electric cars such as no sales tax, no import tax, free access to toll
roads, no vehicle-registration fees, and free parking in some city regions; also there is a
policy for demand of buyer subsidies and rebates (Clover, 2017).

STRATEGIC MANAGEMENT 3
Threat of substitutes: Threat of substitutes is low as companies are trying to focus on EVs
for reducing environmental negative impact and for achieving competitive advantage in
development areas.
Threat of new entrants: It is not easy to beat Volkswagen, Daimler and BMW where the
threat of new entrants in low.
Intensity of competition: There is a moderate level of competition where competitors
include VW Group Auto and BMW carmakers taking place with rapid transformation by
implementing strategies where Daimler’s strategy is an approach of “Connected,
Autonomous, Shared, Electric” for fast pacing trends in the industry (Ehlers, 2018).
Value chain analysis
One of the primary activities of Daimler is its operations differentiating its outlook in China
in various segments reflecting the country to be largest automobile market across the globe in
future. It went successful by using mobility strategy of Daimler consisting car-sharing
service, car2go (Lei, 2017). In terms of support activities, technology development and
human resource management is what Daimler focused on while operating its R&D Center in
China.
SMART
Daimler apply the SMART strategy in its activities relating to the goal of new R&D Center in
China specifically, by measuring every aspect of its sales and progress in the country
considering the impact of external environment where the company can face challenges. But
the goal of Daimler establishing new R&D Centre in China was real as they faced many
challenges still made sure to attain their goals by using resources and tools. Moreover, it was
essential to align specific strategy for gaining competitive advantage in terms of completion
of relevant mission. And lastly, Daimler made sure to achieve success in China within the
period of 10 years for future expansion and success and China has been the largest
automobile industry across the globe (Daimler, 2016).
Strategy
Mercedes-Benz adopted internationalisation strategy for new research and development
(R&D) Center in China where the company shows full dedication and commitment to China.

STRATEGIC MANAGEMENT 4
Across the globe, China has been the most important market for the automotive industry with
a fast forward mode. This is the reason of reflecting and recognising importance in the
company’s local R&D activities. In China, the key component for the company is their
strategy of sustainable growth where this new R&D Center will help in fully covering the
potential and Chinese customers along with listening to them and fulfil their expectations in
terms of future product development and global network (Daimler, 2014). The strategy of
internationalisation supported the vision of Mercedes-Benz in becoming a largest premium
care manufacturer globally by establishment of strong and complimentary R&D Center
network enabling incorporation of needs, taste and trends locally in the company’s products
more rapidly.
Cost-volume-profit (CVP) Analysis
There was rise in 12 per cent of annual sales through new-energy vehicles where China
invested $60 billion in development of electric-car infrastructure and in its vehicles market
(Huang, 2019). Moreover, the policy was imposed by the China’s government for driving
ZEVs (zero-emissions vehicles) that represented new car sales influencing both global and
local markets (Szymkowski, 2017).
VRIN
In China, Daimler establishment of R&D Center for performing activities for local customer
base is a valuable resource which helps the company in attaining competitive advantage
across the globe. The use of strategies for the development of EVs is rare in terms of
association while autonomous car development where the use of new technologies in non-
substitutable which also involved complementary assets (Fusheng, 2019). EVs success was
dependent on the charging facilities and efficient storage batteries development while
focusing on Chinese policy regions with the requirement of new and complementary software
accessibility in the rapidly changing market dynamics for gaining competitive advantage in
terms of fighting competition in the automobile industry of China while exploring automated
vehicle testing and production.

STRATEGIC MANAGEMENT 5
References
Clover, C., 2017. Subsidies help China sell the most electric cars. [Online]
Available at: https://www.ft.com/content/18afe28e-a1d2-11e7-8d56-98a09be71849
[Accessed 13 April 2020].
Daimler, 2014. Grand Opening Mercedes-Benz Research & Development China: Mercedes-
Benz shows dedication to Chinese customers with new R&D Center in Beijing. [Online]
Available at: https://media.daimler.com/marsMediaSite/en/instance/ko/Grand-Opening-
Mercedes-Benz-Research--Development-China-Mercedes-Benz-shows-dedication-to-
Chinese-customers-with-new-RD-Center-in-Beijing.xhtml?oid=9920033
[Accessed 13 April 2020].
Daimler, 2016. Mercedes-Benz Research & Development Center in China: an integral and
essential part of the global R&D network. [Online]
Available at: https://media.daimler.com/marsMediaSite/en/instance/ko/Mercedes-Benz-
Research--Development-Center-in-China-an-integral-and-essential-part-of-the-global-RD-
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[Accessed 13 April 2020].
Ehlers, C., 2018. MOBILITY OF THE FUTURE – CONNECTED, AUTONOMOUS,
SHARED, ELECTRIC. [Online]
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[Accessed 13 April 2020].
Fusheng, L., 2019. Daimler strengthens localization in China. [Online]
Available at: http://www.chinadaily.com.cn/cndy/2019-01/30/content_37433414.htm
[Accessed 13 April 2020].
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Available at: https://www.globalfleet.com/en/technology-and-innovation/asia-pacific/
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[Accessed 13 April 2020].

STRATEGIC MANAGEMENT 6
Huang, E., 2019. A year ago, China’s electric vehicle sales grew 126%. Now they’re at 2%.
[Online]
Available at: https://qz.com/1641512/chinas-electric-vehicle-sales-grew-126-a-year-ago-
now-theyre-at-2/
[Accessed 13 April 2020].
Kamchev, B., 2019. Growth Still Forecast for China Car Parc. [Online]
Available at: https://pubs.lubesngreases.com/lubereport-asia/growth-still-forecast-for-china-
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[Accessed 13 April 2020].
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[Online]
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car2go-and-car2share-mobility-services-in-china/
[Accessed 13 April 2020].
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China: BYD strategies and government subsidies. RAI Revista de Administração e Inovação,
13(1), pp. 3-11.
Rauwald, C., 2019. China's BAIC takes 5-per-cent stake in Daimler to boost partnership.
[Online]
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stake-in-daimler-to-boost-partnership
[Accessed 13 April 2020].
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[Accessed 13 April 2020].

STRATEGIC MANAGEMENT 7
Szymkowski, S., 2017. How California and China plan to push for millions of zero-emission
vehicles. [Online]
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[Online]
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